BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1098|
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THIRD READING
Bill No: AB 1098
Author: Hagman (R), et al.
Amended: 8/7/12 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 9-0, 6/22/11
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Price, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 5/26/11 (Consent) - See last page
for vote
SUBJECT : Insurance: unfair methods of competition:
automotive repair
SOURCE : Author
DIGEST : This bill defines as an unfair practice the
failure to follow the proposed standards for the
preparation of estimates by an insurer and rules that apply
when an insurer requires the use non-original equipment
manufacturer parts.
Senate Floor Amendments of 8/7/12 enhance the rules related
to negotiating repair costs between insurers and auto body
shops.
ANALYSIS :
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Existing law:
1. Defines unfair methods of competition and unfair and
deceptive acts or practices in the business of
insurance, including knowingly committing or performing
with such frequency as to indicate a general business
practice of various unfair claims settlement practices,
such as not attempting in good faith to effectuate
prompt, fair, and equitable settlements of claims in
which liability has become reasonably clear. If a
person engages in any unfair method of competition or
any unfair or deceptive act or practice, that person may
be subject to a civil penalty fixed by the Insurance
Commissioner.
2. Specifies certain rules governing the relationship
between an insurer and an auto body repair shop when
participating in the insurer's direct repair program.
3. Permits a registered auto body repair shop that is
denied participation in an insurer's direct repair
program to report a denial to the Department of
Insurance (DOI).
4. The DOI is required to maintain a record of all those
denials for the purposes of gathering market conduct
information and requires an insurer, upon the request of
the DOI, to disclose the fact that a denial was made.
5. Authorizes an insurer to disclose personal or privileged
information about an individual to an insurance
regulatory authority, or to a law enforcement or other
governmental authority pursuant to law, or to make such
other disclosures otherwise permitted or required by
law.
This bill adds the following practices to the list of
unfair claims settlement practices:
1. Failing to estimate the cost of automotive repairs in
accordance with accepted trade standards for good and
workmanlike automotive repair. Estimates shall allow
for repairs to be made by auto body repair shops, as
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defined. The estimates shall be based on any of the
following:
A. Original equipment manufacturer repair
specifications.
B. Nationally distributed and periodically updated
collision estimating guides.
C. Generally accepted practices by the auto body
repair and insurance industries.
2. If the repair costs exceed the written repair estimates
prepared by or for the insurer, adjusting a claimant's
written repair estimate without providing one of the
following:
A. An edited copy of the claimant's auto body repair
shop estimate.
B. An edited copy of the insurer's estimate.
C. A supplemental estimate prepared by the insurer
adjusting the itemized supplemental request from the
claimant's auto body repair shop.
3. Requiring the use of nonoriginal equipment manufacturer
replacement crash parts in the repair of an automobile,
unless the insurer specifying the use of nonoriginal
equipment manufacturer replacement crash parts only
specified parts that are distributed by entities that do
all of the following:
A. Agree to pay the cost of any modifications to the
parts that may be necessary to affect the repair.
B. Agree to pay the cost to the auto body repair shop
associated with returning the part, and to replace
the part.
C. Have in place a program to analyze parts returned
with defects and report the part number, lot number,
and nature of each defect to the manufacturer and any
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entity that certifies the parts. An insurer shall
obtain from the distributor and report the defect
information to the DOI upon request.
D. Indemnify the auto body repair shop for any part
verified by the distributor to be defective. For
purposes of this bill, a part with a defect rate of
5% or greater installed in 1,000 or more vehicles
shall be considered to be defective.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/12/11)(per Senate Insurance
Committee analysis - per the prior version of the bill)
Personal Insurance Federation of California
ASSEMBLY FLOOR : 75-0, 5/26/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Carter,
Chesbro, Conway, Cook, Dickinson, Donnelly, Eng, Feuer,
Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso,
Huffman, Jeffries, Knight, Lara, Logue, Bonnie Lowenthal,
Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
Pérez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. Pérez
NO VOTE RECORDED: Campos, Cedillo, Davis, Gorell, Jones
JJA:k 8/8/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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